August 2017 Employment: Employment Bubble Deflates & a Loss of JOI

As predictably happens every year, the initial surge of employment seen in Rhode Island’s statistics has turned around. In August, Rhode Island’s employment fell by 137 and the labor force by 595 from the prior month. If past experience is any guide, this downward drift will continue for the rest of the year, and early next year, the Bureau of Labor Statistics (BLS) will revise the numbers down substantially and rewrite the entire year to show a more-gradual increase to that lower point.

With the labor force falling more than employment, these decreases mean that the state’s unemployment rate would be going up more substantially than the BLS’s presentation suggests if the labor force had not decreased so much since the onset of the Great Recession. If Rhode Islanders hadn’t stopped looking for work, the state’s unemployment rate would still be at 7.3%.

Putting Rhode Island in the context of its neighbors shows that the Ocean State continues to be the slow performer of Southern New England. The employment and labor force data for Massachusetts and Connecticut do show cooling, but both states’ results follow a much more pronounced increase from a better starting place at the beginning of the year.

Nationally, Rhode Island is one of just a handful of states that has yet to gain back all of its lost employment, even as the economy stands overdue for a recession.

The one bright side of this employment post is only bright because the Current missed a month. Jobs based in Rhode Island were completely flat in August, from July, but the prior month saw a 3,600-job increase. While positive, that increase would have to become a trend to change the long-term picture, which is of a very slow increase over time.

Whatever positive shine can be polished onto the job number, however, dulls under the cloud of the Rhode Island Center for Freedom & Prosperity’s Jobs & Opportunity Index (JOI). In August, Rhode Island fell to 49th in the country on JOI, after having spent five years at 48th. Obviously, Rhode Island has a long way to go before it’s competitive with any other New England state, but it has to begin improving, rather than worsening, before being competitive is even plausible. Much of the harm in this month’s report came from a substantial decrease in personal income (down 1.5%, or $679 million), even as state and local taxes climbed by $20 million.